Suzanne DuLong Vice President, Investor Relations
François Locoh-Donou President & Chief Executive Officer
Frank Pelzer Executive Vice President & Chief Financial Officer
Erik Lapinski Morgan Stanley
James Fish Piper Sandler
Sami Badri Credit Suisse
Alex Henderson Needham
Tim Long Barclays
Samik Chatterjee J.P. Morgan
Jeff Kvaal Wolfe Research
Call transcript
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Good afternoon and welcome to the F5 Fourth Quarter Fiscal 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. call Ms. the turn now over to I'll Suzanne DuLong. you begin. may Ma'am,

Suzanne DuLong

available hand Pelzer, A I'm an January on The Hello is of President Vice where are and Frank available Other dialing call. on XXXXXXX. version will replay copy of at press site meeting today's is available on of archived website the President visuals Suzanne XXX-XXX-XXXX. prepared questions posted by at President IR during today's team XXXX. be through welcome. CFO XX and are by call Executive Pacific viewable will discussion FX will and today's live of and today's discussion. be answer FX's be executive time FX's remarks be the the webcast Locoh-Donou, our XXX-XXX-XXXX DuLong, October and will or making through Today's ID Vice on François Investor CEO; which Use the XX, conclusion our to today's fX.com, FX's of also supported mid-night members to call of Q&A session. release Relations.

questions, additional directly s.dulong@fX.com. For out to follow-up reach at me information please or

over presented the affect call. forward-looking or anticipate, press duty that implied in François. contain that, no summarized in that announcing FX by these forward-looking expressed in detail note information our will the include today Factors will and turn With update as our which results actual our may Please believe, cause in any this to call may I discussion Our financial involve uncertainties such filings. materially to differ are expect release those our from words results SEC These target. described risks has and statements statements and results that to statements.

François Locoh-Donou

everyone. afternoon, for and us you Thank you, joining today. good Thank Suzanne

the FX year proud us delivering team team executive I of fiscal say we under strong for when year how I the of year any extraordinary a expected, very was that the are XXXX not While speak entire for circumstances.

pivot our strength a our value business. our with several of also Our solutions. They results incumbency, of the aligned customer show our relationships and we customers' stickiness subscription-driven years, to the last software have of In momentum investments most pressing show in the and the our building our priorities.

result, for our a grew a software 'XX XX%. to built we run decline business, the revenue, have in XXXX was software As systems but million which than more fiscal close $XXX product business XX% year. offset business, FY strength in $XXX down of year With the rate in million our

business Our X%. services grew

delivered growth growth. X% they ever the the and X% For face year, we have non-GAAP non-GAAP and exploding customers our application expect users more revenue that revenue applications. reality growth than from Today, product

quickly loads, how it customers' their Our and just are its whether it on depends, application but and not responds users whether secure. business

New for focused to have then will enable performance ways fourth I review faster. customer XXXX and that some drivers, to We scale we fiscal growth positioned will the speak including working quarter and from financial of year Frank? and them our customers our results application serve work on Frank fiscal demand. the quarter. and to our outlook. higher ideally year this believe smarter are expectations solutions highlights

Frank Pelzer

non-GAAP our everyone. revenue delivered very for our fiscal range. afternoon, François up you, I $XXX QX. our We Please results of a Fourth review note, 'XX. product for quarter $XXX approximately of to revenue approximately million Thank was to was fourth and year measures. to total basis, our GAAP revenue year-over-year million and good referring up was above $XXX speak mix, outlook be I QX quarter high accounted revenue the then $XXX On revenue. million to $XXX end and of non-GAAP strong million a X% revenue discussing of XX% will and I our will million. FY QX as X% first guidance year-over-year before

prior-year Software XX% revenue contributed was the of in Shape quarter. $XX approximately $XXX million million the growing XX% period. very tough against in a growth comparison

software comp again X% against Excluding Shape's a grew in contribution, year-ago the tough very period.

look are we that when speak in very QX. seeing positive and business guidance. As trends I ahead, greater expect in I QX stronger software will detail, our our a much discuss we to software growth in

revenue from to quarter. a in grow percent the XXX% XX% year in representing as product product up Software of continues revenue, of ago QX,

based Americas comes delivered momentum XX% revenue APAC a revenue. the XX% was revenue improvement software the to from of year-over-year continue and in portion Revenue result utility as recurring the subscription On as X% a growth, the $XXX totaled of also mentioned total representing and down our maintenance XX% largely X% $XXX revenue as revenue of in revenue was X% XX% of previously. revenue. well QX, growth quarter. for of I XX% from Services compared basis of represented year-ago grew subscription up to to revenue million a in quarter. and drive year-over-year strong in representing regional service period. of million year. last The Subscription Systems subscriptions the quarter of momentum. sources, software down revenue We year-ago the represented XX% delivered This in XX% revenue. which year-over-year compared XX% X% of revenue. of services accounted as EMEA is term revenue includes X%

of quarter including represented we Federal. representing robust bookings US product at government product our for vertical, Service from of enterprise with saw XX% Looking the in enterprise bookings. XX% customers accounted activity bookings and providers by XX% XX%

$XXX QX was million. Non-GAAP XX.X%. XX.X%. QX in results. operating million. GAAP expenses me expenses margin our share Non-GAAP GAAP now were was was gross gross $XXX operating operating margin Let

was and was Our XX.X%. GAAP operating operating margin margin in QX our XX%, non-GAAP

Our rate was GAAP effective quarter the tax XX.X%. for

XXX,XXX shares approximately of of $XXX Our million year-over-year generated approximately at XX days for We cash total $XX to quarter the quarter average will end. X,XXX was quarter net balance income $XXX expenditures quarter or for $X.X QX. the $XX million income $XXX million stock employees, XX% $XX a was We million. to from QX. I $X.X and GAAP or common Cash turn quarter in the Non-GAAP and per in per totaled investments at rate capital price were million. repurchased tax was revenue share. employees flow XX billion. X% the per FX approximately share share. billion DSO $X.XX operations ended with approximately in an We from non-GAAP sheet. for increased up effective net approximately the $X.XX [ph]. Deferred now of was

to results. our Let me year XXXX now turn full

totaled in XXXX. revenue of compared revenue year fiscal in grew XX% grew X% represented X% in approximately XX% year to for $X.XX of grew grew up billion. X% approximately software $X.XX from revenue and software from Non-GAAP of revenue. Non-GAAP product year revenue, revenue GAAP and year year, systems during prior XXXX XXXX. XX% sources XX% Subscriptions recurring total declined of product of revenue revenue. XX% revenue $X.XX the to Revenue accounted totaled the Services billion XX% fiscal of while fiscal the year, represented Within XX% total from billion. year XX%. for For $X billion revenue the

or FY million rate tax for for 'XX $X.XX effective net share. $X.XX $XXX was per income was or GAAP non-GAAP per the XX.X%. net $XXX Non-GAAP income Our share. year million was

quarter Unless for guidance Now, and some let guidance our for XXXX. my fiscal modeling stated, that non-GAAP please first high the me comments level metrics. assumptions otherwise reference In share note broader fiscal the of uncertainty continued trends economic and related and understand today. have QX in we global our the year outlooks, to to them COVID-XX attempted factor we expected impact as

immediate of for employees. expectations Near the them XXXX. me the customers term, and will sharing prioritize continue first serve Let that with enable to quarter expect our their customers we start of investments to needs

anticipate an investment security. focus continued also on We application in

to world, in million. drive the enterprises expect operationalized non-GAAP being application are million trusted FY a innovation and We range $XXX this value. targeting revenue our mind, and with the to partner strategies from to of With as to agility 'XX business the they benefit QX we around increase largest in $XXX of continue

QX XX% estimate be XX% expect expenses the we and XX.X% margins million. of operating 'XX for $XXX We XX% We our to gross to million range. rate will QX to $XXX tax anticipate effective in of

target is share. $X.XX earnings to QX Our per $X.XX

share-based QX approximately of million $XX $XX expense million. to expect compensation We

repurchase capital our the in we for deployment, retain to opportunistically any shares open option As trading window.

the let for share of expectations full of Now, year XXXX. our fiscal operating me some

least revenue full year momentum we rate for of QX offerings, strong Based year software We XX% our our grows. pipeline subscription on QX. 'XX, our than software expect growth the grow have and fiscal progress as expect we software this to made on tremendous transition expect continue to software and software contribution at more in increasing by Accounting progress for and in subscription a momentum software from SaaS XX%. from the

high-single for the moderate digits XX% expect 'XX compared We We to approximately FY will for declining year. the gross anticipate systems slightly declines margins likely of year.

to achieve least expect margin FY for non-GAAP 'XX. We at operating XX%

We typical fiscal our be of We effective some quarter. to also to QX seasonal operating range our pattern. margins to second 'XX XX% following and with in move fluctuations quarter year rate XX%, expect then from increase to QX to of down half to in fiscal anticipate full the tax the

of of expect $XX We expenditures in stock million $XX based 'XX $XXX to and fiscal to million million the range range in year compensation the $XXX capital million.

Please which back we outlook term pre-register to call virtually François. will update I on remember Investor site. Investor to November at longer to conduct Relations and our With over on the expect turn XX. will We that, François? Analyst Meeting our our

François Locoh-Donou

strategy addressable our you, our application reach It has have built our of Thank years process we portfolio three market. FX. delivery and we transform and than expanded more available been broadest the the unveiled In our expanding significantly and security extending since role, Frank. to

foundation our the becoming has way of to As on grown company. predominantly a business are driven and software result, we a our stronger

a our will revenue. subscription SaaS to growing forward, broader based diversified, thanks Going and be growth software and more

subscription renewal with true to sizable geographies a and subscription We a contracts. is across and growing momentum of flywheel on verticals. all consumption forward long-term for starting opportunities portion our that turn Demand revenue is based have

was XX% up XXXX from As Frank in software mentioned, XX% of fiscal year revenue based, our XXXX. subscription

software year XXXX in expect in growth will drivers our continued and speak turn. fiscal I We momentum to

done deploying the BIG-IP BIG-IP. have far comes spoken growth purchasing, about delivered extensive have and reduce software. managing First, software, work we friction software core much I in of back we the BIG-IP on of have the to previously thus

flexibility enhanced on focused have on in automation commercial models management. our in We central and

multinational applications well consumer BIG-IP as QX, capacity scale In core chose BIG-IP customers refresh its end increased During a as handle to dot-com to additions. one facing to both site and business instance, chose processing. back traffic delivery company services for to

growth application multi-cloud in customers' traditional scale critical by Looking expect BIG-IP from need driven hybrid ahead, mission continued we and support and to environment.

Our second Nginx. multiple growth is brings Nginx to FY driver 'XX beyond. vectors growth and

expand customer Nginx Controller to them. continuing desk Plus instances, to building to orchestration analytics increasing and In Nginx app controller, that and to we infrastructure in divide apps our between scale bridges complementary BIG-IP addition and modern modern and teams monitor see the interest platform. teams the need secure, is

rapidly Nginx's App modern modern application. In differentiator. We for for video scale developers service and explosive demand. are ability conferencing application also COVID-XX with opportunities our platform growth, Nginx this also professionals Protect introduce that lifecycle an enable already we next opening no security key however, scale application solution in a Nginx the security came, technology to explosive development Nginx Nginx is key Protect, concerns. that and a major was to meet App customer new the delivery of win to QX, security them collaboration app enabling secured impact to security With on Protect, stack. increased vast early making a with with and security part App platform.

understandably us to shape application like login and cases, capture wide with with when ability the load of to believe growth credential a application third this security protecting modern a are existing stuffing we with including to positions to footprint and provides a has use appeal time, transition our architectures set Use attacks attack the engagement. App In organizations environment, requirements preventing also ever of on and solution. which the and of focus cloud for Protect only large our good more sophistication one a same way [ph] additional caching growing customer and applications It expand are employee large enterprises. best-in-class did Application enable security our dramatically. and so. gaining As accelerate Nginx security than and cases reliant collaboration on momentum customer. agnostic not pages the increased meet including in That At current customers is surface balancing, this security. to the driver, enabling

and SSL access web firewalls, and security During application orchestration customers' fraud FY demands. 'XX remote protection led

load presence. example, both with a web cloud a dot-com QX, with BIG-IP firewall additions As a retailer and solution. a cloud significant during native an we virtual secured outperformed win balancing application

in result, a the doubled customer term just year As multi-year FX consumption first the its of subscription. its

application We have we seen this expect grow year persist in the 'XX. FY demands security and

As our a the space. leadership result, in we to expand expect

Our multi-cloud a across ability and environments to apply is security growing consistent customer significant robust and need. fulfilling

team threats, of the contributor Shape context and as In FX. addition Customers already looking the great both a Shape's Shape see number the Within human. driver. strong to capabilities are been Shape the nine months, application of learning we to growth software portfolio. machine AI and has a bot a roughly of FX been part also a security, has to protect against growing and enabled defense significant

FX customers. fraud across multiple resonating in more even verticals. to value than grown bot customers have and the proposition protection our brings is opportunity intelligent it Shape's with We confident

instance, social to the a and actionable users a differentiator work. deliver to the Shape was Shape key capabilities with secured which degree platform ability of behavior. intelligence line Shape's artificially managed high a by with services world's via also our platforms win from confidence civil its influence one to integration platform, networking caused no inauthentic QX, we win. available high this with customers Shape's For in protect largest is of efficacy allows from benefit generated and in

brings. wins several this integration the frame. very secured ease implementation Thanks of have a it We and to time short in

of majority the the top US core needs. Shape. This the XX is In thousands line Shape example civil extended who fact, of banks which on mid-size win takes managed premises installed and banks small and are our of one of one their to using already recent integrated for is combination of security an with

are much Shape's at We tremendous a both anti-fraud increases making industry larger facing leading a available of and customer attacks. time the solutions volume base into are customers taking sophistication in them when and

in cloud driver growth fourth growth is Our continued deployments.

FX more Our use are FY as total on increased business an ensure and Security robust security. to 'XX role cases $XXX million. than cloud application rely playing consistent customers

Our cloud providers. in the partnership and our driven both has organic cloud our been FY with services through by cloud investments presence

complementary AWS agreement is just highly provider Our strategic with example partnership. one collaboration of a cloud

and addition co-selling In native to AWS FX integrated is cloud for and a generating on new FX, which leads motion, co-innovated solutions. programs have

Protect. securely a web App and APIs from SaaS Integrating Amazon security application. fast introduced data, we deliver and latency service combining network FX's week all App solution or Essential Amazon solution developer globally to CloudFront App for friendly a speeds protecting delivery are transfer last Just Protect, a CloudFront high Essential AWS. CDN Essential customers joint within applications content FX easy and CloudFront is these and environment. low to video Protect with deploy

on and explore doing integration security This application delivers higher. customers' customers quote deliver up the our remiss our power that general, collaboration their continue service leveraging we AWS we value AWS can the with provider come power with for return if is how we and users. to I from a year I are and performance activities together RFP capabilities request application to long-term more illustrates would did provide of customers a not better speak solution, are their cost, two last be We are reduce through In informal with companies activity experience providers. strengthen of caching and also cloud service to applications. and the which this higher see opportunity SaaS increase and much to single help in investment

on in see activities customer multiple our following we and to several we including with plans this movement more strategy. customers. engaged point, are XG their win, are trials At solid Rakuten addition, In beginning

traditionally in of multiple We we up. choice the and new XG and already second LAN played segment we and systems secured as before continue solutions positioned Gi role begin ramping preferred wrap fact, well to half few deployments to in are the business, have have in wins we design for a words grow that on architectures A to XG XXXX. our functions. in XG networks we into own expect

our in in XXXX decline year to compared fiscal the we declining XXXX As systems Frank expect year high-single slow likely to digits. noted, fiscal

XXX% accelerated is it means While a that transformation there does digital tendency software always. to think not deployments,

the cloud or applications in whether to business, public tied they center, or the anything is systems software between. are Our the whether data in

We comes concerns security fraud. are escalating supporting experiencing rising this With prefer. globally. consumption applications applications growth there to because application mission-critical including our Many of is FX rapid remote and are demand. of these e-commerce model, with customers growth whatever application help working

digital customers look ahead, our As to enable a to opportunity significant extraordinary bring we to experiences life. we see

our customers' application all where securing insights. performance, apps, and live important no reducing are customers' solving always improving has our FX been most We business application their they challenges. valuable complexity, about operational matter unlocking

we Over delivery both available traditional the and broadest built last and years, the have two application security modern portfolio applications. for

our experience long experience has do rapidly transformation and when your exploding in customer. be also years. that load digital fast, and you to deliver user it compelling, to Our and just to if the A of Think understanding is customers reliable, the worst has has from of reality degrades What applications and historically how lose competitive it you slow? easier. industry brand the has of the the large evolving not application Today, deepened redefined. How your app application move growth over seconds yet does been in two do the an application must app last wait world included advantage reset appreciation application Switching the experience, that been face fast fails three been homepage expectations competitive. expectations experience is has markedly has the baseline never were needs richness your is changed. own upgrade if The favorite do their personalized fast-paced Digital trusted. of not A us in they an be under altogether? for elsewhere. or as insurer told customers'

need a FX adapt redundant to becoming contract enable protect itself rich mining portfolio which help self-healing to assembled. gets so. of positioned vulnerability. world our customers efficiencies automates from the do application We them and because experiences. needed, of for quickly. and greater securing we more processes we're see on it a all we expand have it position involving Our deliver these would as where customers' portfolio unique And insightful, to where smarter, We and to and by performance application capabilities and needs, vision, more this points is FX and harnessing uniquely based data, they have

We are we looking changing to making upcoming closing, are we Analyst at progress significant how pivoting adaptive about feel. have and for it reality and way customers the FX our Investor forward vision Meeting. a made speaking more In applications our and

addressable We have delivery services, process. set built in security market the broadest application and and the expanded total available our of

We and driving a recurring building are and robust growing also software-driven successfully of a more base business revenues.

team wrap by up Let our as well customers entire our prepared thanking as and again FX partners. me remarks the

ever aligned well will open our and confident with the both now Q&A. investments to With innovation more are are that longer-term We that our demand. we our vision, than near customer operator, call and


Your Morgan Meta Thank the first question Marshall from comes line Stanley. you. of [Operator Instructions] from

open. is line Your

Erik Lapinski

just bit term that any mindful revenue side. other the providers with that seen segment, some maybe specifically, being equipment than taking this service Thanks matches for of just for near traditionally. but you And wondering of team, for Erik behavior had from been of change our going percentage little have it if back Hi lower wins know that you to and question. some rider made vertical, any order a the on have Maybe the impact on XG, that you comments is to design just I noted Meta. has has on noted

François Locoh-Donou

that change, range. for short last the providers fundamental Hi, service It we answer Erik. is, been haven't bookings The in percentage is the Erik. our same no, has The of seen basically of from a our few quarters. revenue, comes

We providers unique in We providers, are of our security see cases service seeing contribution momentum kind think into activity. of consolidator necessarily order a more that, think kind our in XXXX, but with book. I would a specifically that's half continued with use are turn which of that terms of we But don't position other of is and second when multiple as in the position XG seeing equipment of a to will in telco. traction meaningful functions, you

of providers unique We in consolidating have a infrastructure. and DNS, like number virtualize functions DDoS and a CGNAT their optimization TCP service position and our increasingly

to the growing, so in these business but ability case is the Our overall functions all use been last a that's the appealing the a bundle that very trends the quarters. same that's, business, is and software few to them, consolidate over in has

no specific change. So

Erik Lapinski

on That's of moving you. sneak more, in there then some point strongest thank would choosing incremental side it, stronger reason is what still customers the guys hardware maybe expectations hardware I Got very if drivers? forward, kind are And on you any helpful. to the could just one the are

François Locoh-Donou

government, that -- geographies hardware, Erik, factors. think, the have I in was that hardware in verticals has a to continue hardware form our number business couple more role security important not even the mix our financial is that hardware always a of is were ago number than declining. also And a including play -- form business today our consumption have and an providers, security of important it we've of factors become But I their difference a said services. think we grow years service of

that security. hardware of decline in our business in, a the abating so That's largely to leads because today. you that And that's and factor when of systems that's in hardware mix

Erik Lapinski

helpful. Thank It's very you.


of next the comes from Sandler. line question Fish James from Your Piper

Your open. line is

James Fish

on Thank questions you, guys, Couple quarter. congrats here. of great the

guess security. or application as how customers in sense a using feel now that are how you about about to I Security? many and to portfolio inorganically, get areas are there any talking Shape whether You're whole, organically want the do strength the you'd

François Locoh-Donou

Hi, Jim.

used very the application but security provide can an few who -- are good So how also Shape's protect capabilities portfolio, our we generally, and of an application now the feel application, portfolio. protect very, players combination we we is one one very with of about FX a of security who think

and space. So with competitiveness differentiation we because online COVID, accelerated has all And has feel business to of but healthily, growing and and in amount providing kinds fact tax increased security on of this the and for companies but our significant the in channels, continued very as good digital fact increase had well the in not for months tailwinds in been retailers, fraud that's about few just has us. our that dramatically last

So that's the -- that's what we're more and up on say Analyst app probably security Investor Meeting. in general. about And Jim, we will the at that

James Fish

Fair of work some guys enough. you in not being end sales And through the quarter, to get of in does customers, COVID-XX able sort of front as and to you of this how to last noted APAC weakness quarter? front due -- change due in the

François Locoh-Donou

we I with We're still are some have in think Asia-Pacific, geographies still, Jim. challenged that COVID-XX.

As some you've locked seen there some second has been down. and wave

were growth. XX% for about software the will comment year-on-year. faster than where So we XX% software QX it throughout in greater be The saw feel projects think from We business think case, are, challenged. are been our we XXXX remarks, the that our year, year-on-year was fact half have XXXX starting was you we full have And than hold, and good for first now of about abate the grow prepared the on think as in of will we That some we're the very to but specific geographies some that put we pipeline. see that and QX. still there I

broader on than we that where opportunities software on us see, base product some did a giving we a software more point for year business a has we our of opportunity our of broader inflection subscriptions -- as number renewal. we is -- XX% We've feel here ago. now turned you product an subscription of really much have a the business think revenue. true-forward of our it's an got And software and business than -- So based

very So going to that, XXXX. have into software where while point going continue inflection we to generally our growth is here strong feel

James Fish

Thanks sense. the Makes François. color, for

François Locoh-Donou

you, Thank Jim.


Your next from Rod question Goldman Sachs. the line from comes of Hall

Your line open. is

Rod Hall

to the question. start hi Yes, thanks guys, wanted for I off.

into You that than or I'm tweaks think assuming 'XX the there? order to of assuming the size? a a in enterprise margin and us Can depending some of curious context in growth environment up do in Or into point how terms that could talked you calculate do growth kind size that question you XX%, on if 'XX will I And the Are medium growth, minor above you guys maybe my momentum that. gave, of some can and also can you I being persists? what's more get mean parameters indication. improves? little current slower on on it's you X% growth seeing assumption I order bit based in verticals accelerate dig think you macro good, just And about likely environment are of but where does momentum more macro more enterprises then curious that and enterprise, just you that give do demand your of what wondered you it's color there is, view looks kind just on I of a second too? then growth, the from little

François Locoh-Donou

were Rod. number Hey, There there. of questions

make I'll I'll sure So try...

Rod Hall


you. Thank François. Sorry,

François Locoh-Donou

worries. No

Rod Hall

them, you if I'll need. repeat

François Locoh-Donou

to Yes. I'll from may start the, you repeat. be,

on Just to the macro Rod. start there

assumptions Our materially better is get the as worse. not it we've also environment assumed but than get today, it doesn't does

into us this where environment customers we've of allowed for take are this account been our planning. the think and doing environment. the we've quarters to our that taken XXXX And what into have three I in priorities it's stock in So quarters, pandemic are three reported and their under now full of we last all

we basically kind of status So assume quo.

that the verticals applications we look, and and strong. more spend, application as you two has directly that are continued are question XX% of Now strong. of think more represent are your were less deployments The most enterprise need where the the there financial on they enterprise things are saw technology verticals a the as retail I exposed applications, And to of important, the government. X, of which COVID, that are lot pretty these in in beginning are there. that important transportation, more security our actually as seen are, a Number are we than more by verticals, enterprise numbers for things really weakness, two the are have there services, be verticals, company affected to business. And verticals to our multi-cloud

impact businesses. the small So, yes to medium business have we they soft. limited are limited. exposure And has been the But generally, our very on and

business, you there that's of terms the the And a where for other in that's see our is reason Company. perception FX that so of strong I the still datacenter networking a is enterprise is -- really mix us So there out think the think demand reason. I

And switching to compare and the protect campus customers routing more spend to multi-cloud and security need tied applications look our and is tend to to globally for so post type with reality need is, the for equipment, our more customers or but results deploy to more the in their us environments. at applications

closer it I kind tied And applications, security business so have I... we is Have than growth, -- the of of -- -- network to closely and complexity to our is dynamics.

Rod Hall

X%, all in to same. the than think guys remains it's if I'm of quantification or of kind other you maybe equal. Off growth, just And said, accelerating rate see growth just same, growth the you the you add environment I was I think of where probably think remains but toward on a then, growth 'XX whether of of curious I direction is kind worse. 'XX up grows, held get one kind maybe you lean curious, what which on a or other -- if higher growth you I'm little a yes, things the going services can minimum do is the of -- you depending the only growth. little that but

François Locoh-Donou

we're think, here. not so guidance Look, I we're a year Rod, full not top -- giving line

We will give Horizon three a at AIM. view of guidance X in our weeks

what that I a guidance. would QX based our just little get upon and in there. more So think seen I you'll we've color QX generally say

feel and we good about think achieve I could 'XX. what we

Rod Hall

François. great. Appreciate Okay, Thanks, it.

François Locoh-Donou

Thank you, Rod.


comes line of Credit Suisse. Badri Your next from question the from Sami

open. is line Your

Sami Badri

Hi, much. thank you very

on couple a the any these François, product the in really and then quarter factor lumpiness about there high know, examples drivers solid solid does of we to question of activity in solid to first any was results? when take software also made drove concentration to concentrations that lumpy or going quarter But results that specific is The continue revenue or think there in be cloud have we further, granular in that results. are I the And XQ driving software 'XX fiscal that is quarter? are very and the of composition the step in customers revenues, a related saw strength the I and to the you

François Locoh-Donou

You results we know, point at we And our pretty answer that precisely growth. software if ago, have I is our a actually no. the why that reached so year you look Sami, is see strong software in an inflection had

part we growth, had that couple The QX, remember, but quarter are results large in this not. of of you If transformational XX% driven was we have a in by really deals. kind

subscription. our software adoption So broad our of base it's software a and of

results. our You that probably in saw

our software of revenues from quarter three-quarters our than this more software subscriptions. revenues of came or Now, XX%

number of we that XXXX. we in so that's the subscription to of We're it's software, of been renewal these think where a our number in to they're would of us customer, larger the projects into going subscription flywheel a going And across of our what you starting specific subscription, see a year. opportunities seeing thinking, are I software not a business, that's have the say good say one point our of projects of models software, broad them I about XXXX, broader the that's that on we customers customers verticals, base half have and start the and that some growth say to in the in of pipeline the a giving true-forward a because end year we'll contributing more also of, going reached our number into some of in that for first opportunity would first I adoption our a so half of across our see a growth not multi-year of where would and subscription larger got lumpiness. a at have delayed, a a would software see have confidence consumption though all part we now specific of based why we've vertical

Sami Badri

then would was us at framework, rate services way one a guidance great. And could I just kind that. think of last be for about clarification you the something two any XXXX? fiscal be real of we the question about it, thinking growth Thank Frank. to kind it. Got help for hoping Is XQ you there on that of should similar quarters

Frank Pelzer

rate to growth AIM. give as going I'm say said at specific more have to François Yes. a we'll number, not

rate towards think 'XX. lower in trend FY the growth I is single-digit likely

with cohorts been the is an And with we been so really attach we've contracts happy attach overall services all in pricing, software hardware, so age the rates, of consistent have we're business. just but seeing the this and for increase rates consistent seeing

Sami Badri

you. thank Great,

Solid in results. my fitting for you questions. Thank

François Locoh-Donou

Yes. Thank you, Sami.


from Needham. comes question the next Alex Your line Henderson from of

is line open. Your

Alex Henderson

Thank you very much.

said some the heard the to have to around in though endpoint the programs, pushed particularly around also that number like. programs work spending, What the bars those talk So, and and home, important, and is -- transitional strategically IT people emergency out more a from somewhat. we've orientation been of about they've industry spending security particularly delayed that, other transition type things security, of

little Kubernetes temporary Or from to starting larger you deployment that's around the headlines? to and clarity a and in, As of something Are secure focus on, make transformations that further from sure any we've orchestrated in see work still got cloud of particularly projects to some result adoption? real application out back is the everything those a coming around alternatively, that digital home.

François Locoh-Donou

some large we in tended to projects I first and all, these also them. but immediate back projects, priorities seeing to of echo seen the starting we now have are are what digital Alex, said, think would reignite of transformation a kind so, of the coming these to projects, people delay you've transformational have they I and

first the to what that's of actually to of excitement automation I've think production I these taking projects we're transformation, kind of see to be come big of generally around specifically Those start you I environments, in speak Kubernetes I movement some types Kubernetes -- -- lot should projects. XXXX, we So of there, environment what think first to kind of half in is this projects. why seeing, there applies environment, that's When to to think software be said digital realized. And a at cloud, scale.

good I and into a deployment. think that we're still in We've controller the know Nginx very Nginx, egress very early the that. innings number Kubernetes window you with X environment as into is in got of

But we're demand seeing still we of types acceleration. in we're And seeing so innings the and we deployments. are an early think there of those very containerized

Alex Henderson

portion is you then me, in plus just growth is the what organic last just of that between portion to for one that software, what And parse question XX% can that of going back inorganic? and

François Locoh-Donou

Well, the our we've information given -- QX and contributions Shape think QX. about but the I no, in of

FX do year. could Shape of and inorganic. they FX some that was of QX much you information Remember last of that QX were pretty So but kind try and part onwards, from of out, what's of parse part organic not to in XXXX,

think the mentioned that. this -- spoken if don't that week and about with it's given acceleration we CloudFront, AWS rate. we which a is XX% that we're have AWS -- the think well. product seeing business catalyst seeing would exceeded we broad drivers in organic last the and our a of We up we do. think now better got likely, in Overall, base that's announced integration continues -- partnership the but you We of that script, talked just a with the very million, than $XXX to our do minimum go overall what which we're I I year. subscriptions, on be drive environment, next there growth Nginx, that the We I pick know AWS in the So the million. Kubernetes cloud, has will I've growth kind Alex, cloud we'll about to in $XXX We've will

business So with the software overall, happy in acceleration is I phase that. think and we're

Alex Henderson

quarter. Thank you Great very much.


Tim the Your next Long of from question Barclays. comes line from

open. is line Your

Tim Long

two Thank quick I Yes, ones, you. could. if

traction could Shape. software a on talk could bit more guess side, sounds a lot for of about But we curious, bit a pretty there synergies room Shape Nginx a is, cross-selling bit like just where kind to synergy BIG-IP if And you First, there? second there moderating kind been that the little us both know It good is revenue been, for quarter. and has there traction you of from much question are little if let and you on but in of I good then hardware side, can the a get how Nginx. basis just had there into about, talk the want cannibalization. the is And of had little on

be so Thank do So a point was the sum positive workloads newer software of hitting software a than more those replacement. more to on you start where we'll the you. is some lot it hardware two maybe just by it's driven there think side, BIG-IP could that when

François Locoh-Donou

you. thank Hey Tim,

a a deal on few on and at the the Let highlights for me are engineers seeing is And weeks, our for Nginx month. part capabilities Shape we both and sizes Tim, see with few a are XX logo would Nginx, we our been substantial synergies. What we and of about FX the FX more is size the the deal organizations. result been of new so Shape months both nine average market seeing terms in in acquisition but What acceleration also Nginx. will of for of that for has start has Shape and go AIM both an of that you in essentially of part increase to

of FX combination Nginx, results. the go-to-market yielding is and these so And

we're nine is we runway, seeing trends. monetization platform of have the months of same the exactly better with so the but the And Shape, only

and you but very early platform, came in terms of of part called controller Nginx of the now Protect, and the traction but early platform, the Now early also Nginx know size with solutions, increase when new security getting days, FX, powerful Nginx. synergies, App Nginx two released up were are We've product they as as into monetization substantially deal the will monetization. just really which

line our offering. have BIG-IP, new and and And silver monetization. to products moved Shape then Shape, Shape quickly build accelerate and integrations to So between coming extremely on we

already So in the service civil as security last has we Civil DDoS existed accelerated bundle service defense offer top WAF now and security quarter. business managed the bought managed a for example, and technology in of Shape the line that already on our that

what's there weeks. few touch again in we're excited So on very become about I and a will that

business, our Tim, question there to business single is result you which on think bigger hardware or that but that's bundles it's your hardware, going and it, what BIG-IP, about increasingly load in decline. we to is hardware year either -- are and hardware total security you're think If the that And continue we we next digits. But by to think the stand-alone standalone the seeing I the think balancing the declining, business know of XX% business. of Hardware not decline high is about was is think to is you mix together hardware a Now the driven our of ADC seeing going security Security our hardware, I in be XX%,

that's your continuing I we're forecast in we're overall in and to customers why to we hardware. first to point both So see continue more adopt -- that's will approach the cloud, think -- then that declines where on-prem software cannibalization, and are a ADC customers on and

Tim Long

Okay, thank you.

François Locoh-Donou

Tim. Thanks,


Your Morgan. line the Samik Chatterjee J.P. from of comes next from question

Your line open. is

Samik Chatterjee

you Hi, thanks seeing just me here. start if for some traction from color on you're squeezing for Shape. François, in can I the getting with

about happening seeing around kind I have and more and once you consolidation we comfort solutions existing this post COVID customers, or solutions you. get any a get kind we wave Can from is how talked vendor Thank because do replacing just the seeing of of like a follow-up. and not planning just of whether that security, you you're need the about adoption security seeing. you're there You are opportunities talk for

François Locoh-Donou

concern Samik. of around Hi, last consolidation. explain bit seeing wave a Could that you of

Samik Chatterjee

overall. to to vendors trying momentum is, had lot was I security a get of the here What for we've

planning security we do more the enterprises, like the from So work get COVID post number of kind once of enterprises consolidation with. and vendors see we most

François Locoh-Donou

large. think and is that to continue Samik, see I you'll seeing most Yes, what we're what

want large to that exposed service a kind and of really increasingly best-of-suite both FX to large use providers So enterprises remember enterprises most is and approach.

of allow application so stay logic secure to suite And So essentially our their is of offer the these It's applications It's them to application a can not online, combination approach single that security. and application is you portfolio application the applications. that us security a slice to not security security stay of component. broadest allow have. for overall technologies data a and protect to that

so... And


the have and delay Samik conference. I and us, line. Ladies the a gentlemen, is hold call operator. momentarily. and slight will until resume Ladies for Chatterjee gentlemen, apologize I gentlemen, the speakers this rejoined you in ladies today's we momentarily. do this for apologize The operator. our there'll please in conference, The speakers' today's be reconnect Thank have the Again, is will patience. for delay in slight for we conference still resume and your queue question.

Samik Chatterjee

François. Hi,

François Locoh-Donou

Samik, sorry about that.

the dropped. Our did And hear you answer? part of first the was line

Samik Chatterjee


Yes, services. [ph] overall So, yes.

up can here. I follow-up if for I also know So you're on hour just quickly, because the maybe Frank

operating the Just looking prior you when margins announced Frank, with here, that, looking the to were at to about acquisition margin. was operating XX% Shape XX% at

Shape about primarily guiding you the kind or environments when impact XX%, you're is next about there questions. my for year, on have there, taking it you think delta think the think do Now, that of this? an to thank And I I from had is

Frank Pelzer

Sure, absolutely.

XX% ended get on to about to to the and accounted And Shape above that that. always yes, talk low the up range back XX% So think I as for for majority the of We end fiscal make, 'XX. of large Shape XX%.

Samik Chatterjee

Thank you.

François Locoh-Donou

Samik. you, Thank


Kvaal And question of the comes Jeff from Research. Wolfe line your final from

open. line is Your

Jeff Kvaal

I for François, for us. sketch if Frank. you, a one out could you have François, you, question I'm Thank little for guess wondering bit I you. a

your, in And you, your Now behind portfolio of is you little I'm what security into year buyback. where you run find for us if might bit success etcetera, thinking the from etcetera. involve, you do having integrated, your rivals some do yourself find and the where security could in most Frank do help we that? well And the Zscaler expect coming sort the that you of understand wondering a then, to

François Locoh-Donou

Number security. me so where having let X and security. Jeff, application Yes, frame success in we're is

not large we're breaches for and endpoint the single So portfolio that attacks security of most or applications, come more not that's our vulnerabilities our that from have is really and of few not in remote Application focus applications just application, DDoS, is seeing It's sources And players application access if enterprises. of we focus. the our accessed, an is against used, how a with protecting application security. protection but bought having not how we there application per is fraud and a together, and put as provide module success security. is at And focus -- a really now Firewall, protecting through it's and as security that where And look suite the in incidents protecting well the Web only are and portfolio, sophisticated for on are se, behavior go and we're very application the you on network our increasingly solutions solution that.

we're of financial service and services, protecting government the these a technology, applications imagine largest seeing at in media as securing the and terms Shape, digital our with of the lot some the protected the providers. interactions the you stake -- social large, platforms same, in world are and customers. same in FX So, kind the same by and can of But success

we we verticals traction. types lot of get the of a and So where where success solutions that's the got

Frank Pelzer

of same the it's it's uses one buyback, we the our cash certainly on see. as of Jeff, it's then, that strategic And the been,

M&A paying well out our to A potentially Shape. The acquire two Loan took other as that down Term we as are uses

focused the we're those that so And things three on. are

in and did of repurchase that share $XX saw forward. the another You be million to on opportunistic we last quarter continue that going will

Jeff Kvaal

look detail to weeks. sounds forward more the great. security I will Thank you. progress few that And in a Okay, on

Frank Pelzer

so much, Jeff. you Thank


call. for you Thank today's attending

may now disconnect. You